Q3 FY2026
Filed Nov 12, 2026Merlin reports Q3 2026 revenue of $3,461 thousand and GAAP net income of $73,837 thousand, which includes a $103,620 thousand change in fair value of warrant liabilities; operating loss widened to $(31,473) thousand
Revenue is small, operating expenses rose sharply year over year, and the loss from operations widened to $(31,473) thousand. GAAP net income is positive only because of a $103,620 thousand change in fair value of warrant liabilities and $1,504 thousand of interest income, both non-operating. Cash, cash equivalents and short-term investments fell to $161.6 million from $183.9 million at June 30, 2026.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, Q3 2026GAAP | $3.46M | – | – |
| Cost of revenue, Q3 2026GAAP | $5.24M | – | – |
| Gross loss, Q3 2026GAAP | −$1.78M | – | – |
| Research and development, Q3 2026GAAP | $14.71M | – | – |
| General and administrative, Q3 2026GAAP | $12.94M | – | – |
| Selling and marketing, Q3 2026GAAP | $2.04M | – | – |
| Total operating expenses, Q3 2026GAAP | $29.70M | – | – |
| Loss from operations, Q3 2026GAAP | −$31.47M | – | – |
| Interest income, Q3 2026GAAP | $1.50M | – | – |
| Change in fair value of warrant liabilities, Q3 2026GAAP | $103.6M | – | – |
| Total other income (expense), Q3 2026GAAP | $105.1M | – | – |
| Income (loss) before provision for income taxes, Q3 2026GAAP | $73.66M | – | – |
| Provision for (benefit from) income taxes, Q3 2026GAAP | −$173K | – | – |
| Net income (loss), Q3 2026GAAP | $73.84M | – | – |
| Net income (loss) attributable to common stockholders, Q3 2026GAAP | $37.68M | – | – |
| Net income (loss) per share, basic, Q3 2026GAAP | $0.37 | – | – |
| Net income (loss) per share, diluted, Q3 2026GAAP | $0.37 | – | – |
| EBITDA, Q3 2026non-GAAP | $73.05M | – | – |
| Adjusted EBITDA, Q3 2026non-GAAP | −$24.11M | – | – |
| Revenue, nine months 2026GAAP | $6.66M | – | – |
| Cost of revenue, nine months 2026GAAP | $8.97M | – | – |
| Contract loss adjustments, nine months 2026GAAP | −$2.23M | – | – |
| Gross loss, nine months 2026GAAP | −$81K | – | – |
| Research and development, nine months 2026GAAP | $45.19M | – | – |
| General and administrative, nine months 2026GAAP | $42.61M | – | – |
| Total operating expenses, nine months 2026GAAP | $91.94M | – | – |
| Loss from operations, nine months 2026GAAP | −$92.02M | – | – |
| Change in fair value of convertible promissory notes, nine months 2026GAAP | −$87.82M | – | – |
| Net income (loss), nine months 2026GAAP | −$75.01M | – | – |
| Net income (loss) attributable to common stockholders, nine months 2026GAAP | −$153.6M | – | – |
| Net income (loss) per share, basic, nine months 2026GAAP | $(1.72) | – | – |
| Net income (loss) per share, diluted, nine months 2026GAAP | $(1.72) | – | – |
| Adjusted EBITDA, nine months 2026non-GAAP | −$75.28M | – | – |
| Cash, cash equivalents and short-term investments, at Sep 30, 2026other | $161.6M | – | – |
| Total assets, at Sep 30, 2026GAAP | $186.4M | – | – |
| Total stockholders' deficit, at Sep 30, 2026GAAP | −$26.29M | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
FY2027 outlook
- Operating expensesExpected to be meaningfully below the 2026 level; no figure given
- NotePlan is to concentrate investment on programs and customers with funded work and a clear path to revenue
- NoteObjective is to fund the plan into 2029 without depending on capital raises
Capital returns
- No common share repurchases or common dividends are reported in the filing.
- Series A Preferred Stock dividends and accretion: $(8,072) thousand for Q3 2026 and $(17,713) thousand for nine months 2026, per the statement of operations.
- Series A Preferred Stock deemed dividend on down round: $(60,864) thousand for nine months 2026.
- Series A Preferred Stock: 18,655,078 shares issued and outstanding at September 30, 2026, carried at $170,577 thousand in mezzanine equity.
- The forward-looking statements refer to 'recently completed equity financing' without a figure in the release.
What drove it
- Business highlights: a new USSOCOM C-130J task order worth $8.9 million, which the company says moves its C-130J autonomy program into an integration phase.
- Business highlights: a $500,000 USAFRICOM contract to fund a CASEVAC demonstration using Merlin Pilot on a Cessna 208B Grand Caravan.
- Net income includes a $103,620 thousand change in fair value of warrant liabilities in Q3 2026, compared with $(683) thousand in Q3 2025. The release excludes this item from Adjusted EBITDA as a non-cash, periodic mark-to-market adjustment.
- Operating expense lines rose versus the prior year period in every category: R&D, G&A and selling and marketing (see key_metrics).
- The company states that the 2027 planning process aims to lower operating expenses by concentrating investment on programs and customers with funded work.
Concerns
- Loss from operations widened to $(31,473) thousand in Q3 2026 from $(16,607) thousand in Q3 2025, while revenue was $3,461 thousand against $1,924 thousand.
- Q3 2026 GAAP net income of $73,837 thousand depends on the $103,620 thousand warrant fair value change, which the release describes as non-cash and periodic. Operating results are a loss.
- Cash, cash equivalents and short-term investments fell from $183.9 million at June 30, 2026 to $161.6 million at September 30, 2026.
- Nine-month net loss attributable to common stockholders is $(153,586) thousand, after Series A Preferred Stock dividends, accretion and a deemed dividend.
- The release includes a forward-looking statement that Merlin's cash may be insufficient to fund its operating plan for the period anticipated, and cites its history of net losses.
What to watch
- The size and timing of the 2027 operating expense reduction, which the company describes only as meaningfully below 2026 without a figure.
- Conversion of the USSOCOM C-130J integration phase and the USAFRICOM CASEVAC demonstration into production or additional revenue.
- Quarterly cash burn against the company's statement that its plan funds operations into 2029 without capital raises.
- Changes in the warrant liabilities and Series A Preferred Stock, which drive large non-operating swings in net income and net loss attributable to common stockholders.
- Revenue run-rate, which the release reports as $3,461 thousand in Q3 2026 against $2.2 million in Q2 2026.
Balance sheet and cash flow
- Cash and cash equivalents: $161,444 thousand at Sep 30, 2026, compared with $59,343 thousand at Dec 31, 2025.
- Short-term investments: $182 thousand at Sep 30, 2026, compared with $330 thousand at Dec 31, 2025.
- Restricted cash: $2,570 thousand at Sep 30, 2026, compared with nil at Dec 31, 2025.
- Long-term debt (current and non-current) and convertible promissory notes: nil at Sep 30, 2026. At Dec 31, 2025 the filing printed long-term debt current portion of $19,271 thousand, convertible promissory notes of $29,107 thousand and long-term debt non-current of $12,784 thousand.
- Warrant liabilities: $26,517 thousand at Sep 30, 2026, compared with $76,766 thousand at Dec 31, 2025.
- Total liabilities: $42,158 thousand at Sep 30, 2026, compared with $154,180 thousand at Dec 31, 2025.
- Total stockholders' deficit: $(26,292) thousand at Sep 30, 2026, compared with $(73,598) thousand at Dec 31, 2025.
- Total assets: $186,443 thousand at Sep 30, 2026, compared with $80,582 thousand at Dec 31, 2025.
- Accumulated deficit: $(626,062) thousand at Sep 30, 2026, compared with $(551,053) thousand at Dec 31, 2025.
- Cash flow statement, operating cash flow and free cash flow are not included in the release.
Analysis
Merlin reported third quarter 2026 revenue of $3,461 thousand, against $1,924 thousand in the third quarter of 2025 and $2.2 million in the second quarter of 2026. Nine-month revenue was $6,657 thousand, against $5,899 thousand. Gross loss narrowed to $(1,777) thousand from $(2,021) thousand in the prior year quarter, but operating expenses rose to $29,696 thousand from $14,586 thousand, led by research and development at $14,712 thousand and general and administrative at $12,944 thousand. The loss from operations therefore widened to $(31,473) thousand from $(16,607) thousand. The release reports no segment breakdown, so the revenue read rests on the business highlights: a $8.9 million USSOCOM C-130J task order and a $500,000 USAFRICOM contract.
GAAP net income of $73,837 thousand compares with a loss of $(26,696) thousand a year earlier. The filing shows a $103,620 thousand change in fair value of warrant liabilities in the quarter, against $(683) thousand in the prior year quarter, and interest income of $1,504 thousand. Income before taxes was $73,664 thousand. Net income attributable to common stockholders was $37,678 thousand after $8,072 thousand of Series A Preferred Stock dividends and accretion and $28,087 thousand of income attributable to participating securities. Basic and diluted EPS were $0.37, against $(5.24). The release excludes the warrant change from Adjusted EBITDA, which was $(24,110) thousand in the quarter, against $(27,834) thousand in the second quarter and $(13,578) thousand a year earlier. EBITDA was $73,054 thousand, a figure that also includes the warrant gain.
On the balance sheet, cash, cash equivalents and short-term investments were $161.6 million at September 30, 2026, down from $183.9 million at June 30, 2026 and from $161,444 thousand plus $182 thousand at December 31, 2025 (cash and equivalents alone were $59,343 thousand at year end). Convertible notes and long-term debt are nil at September 30, 2026, against $61,158 thousand of combined debt and notes at December 31, 2025, and warrant liabilities fell to $26,517 thousand from $76,766 thousand. Total stockholders' deficit narrowed to $(26,292) thousand from $(73,598) thousand. The filing does not include a cash flow statement, so operating cash burn for the quarter cannot be read from the release.
The outlook is qualitative. Management expects 2027 operating expenses to be meaningfully below 2026, with investment concentrated on programs with funded work and a clear path to revenue. The stated objective is to fund the plan into 2029 without capital raises. No revenue, margin or expense figure for 2027 is given, and no prior outlook was supplied for comparison. The key items to track are the size of the expense reduction, conversion of the two new defense awards, and quarterly cash use against the cash balance.
Management, verbatim
The new $8.9 million task order with USSOCOM moves our C-130J autonomy program into its integration phase, laying the groundwork for future flight demonstrations and production revenue with SOCOM and ultimately the global C-130J fleet including hundreds of aircraft.
Matt George, CEO of Merlin
We believe that it is imperative for Merlin to continue to advance the Merlin Pilot, but it is also imperative that we demonstrate discipline in the investments we make along the way.
Matt George, CEO of Merlin
Not in the filing
stated, not guessed- Numeric 2027 operating expense guidance or any other 2027 figure
- Prior-period outlook, so vs_prior_guidance cannot be assessed
- Cash flow statement, operating cash flow and free cash flow for Q3 2026 and nine months 2026
- Q2 2026 detail for individual expense, gross and other income lines (only revenue, net income, EBITDA, Adjusted EBITDA and cash are printed)
- Q3 2025 and Q2 2026 cash, cash equivalents and short-term investments balances, and Dec 31, 2025 combined cash total
- Percentage or basis-point changes for revenue, gross margin, operating expenses, net income and EPS
- Segment or product line revenue (none printed)
- Share price reaction and consensus estimates (not in the documents)
- Terms, amount and date of the recently completed equity financing referenced in the forward-looking statements
- Quarterly revenue in thousands for Q2 2026 (printed only as $2.2 million)
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.